In April 2018, private rental properties will need to have a minimum EPC rating of E or it will be illegal to rent them to tenants. This change will only apply to new tenancies and renewals. By April 2020, the rule will be extended to incorporate all private rentals regardless of when the tenancy started. Landlords that breach these regulations may face a fine of up to £5,000.
Properties with a EPC rating of F or G will either need to be taken off the market after this date or improvements implemented. Where the EPC indicates a rating of F or G it will be considered substandard under the regulations.
The Government is expected to publish specific guidance for landlords in October this year to clarify the changes. The clarification will hopefully include details on any cost capping on the improvement works landlords are expected to carry out and will also confirm that some, if not all, listed buildings are exempt from the change.
The regulations prohibit any landlord from letting any substandard property until the recommended energy efficiency improvements in the EPC have been carried out. Such works only needs to be appropriate, permissible and cost-effective under the regulations but landlords are free to carry out works to an even higher standard.
Local authorities will be responsible for enforcing the regulations. They have the power to serve a notice and request that a landlord provide further information to prove compliance. Where they find that a landlord is in breach they can impose a financial penalty.
Further penalties can also be imposed where landlords continue to rent out properties despite the breach and original fine. Such fines will not affect the legality of the tenancy which means that rent is still due and payable.
There are exemptions to the regulations, such as:
- The landlord is required to obtain a third party’s consent or permission to undertake improvements, and such consent was denied, or imposed unreasonable conditions.
- The landlord’s tenant withholds consent for the works.
- A suitably qualified independent surveyor considers that the works will cause a capital devaluation of the property of more than 5%.
The extent of any exemption for listed buildings or buildings in conservation areas remains unclear. We will of course provide an update on this when we can.